Essay About Herr Heinz Ruhnau And Chairman Of Lufthansa

Investment Portfolio
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Purchasing the Boeing aircraft at the wrong time. The U.S. dollar was at an all-time high at the
time of the purchase, in January of 1985.
2. Choosing to hedge half the exposure when he expected the dollar to fall. If he had gone through
with his instincts or expectations, he would have left the whole amount unhedged (which some
critics have termed “whole hog”).
It was February 14, 1986, and Herr Heinz Ruhnau, Chairman of Lufthansa (Germany) was summoned
to meet with Lufthansas board. The boards task was to determine if Herr Ruhnaus term of office
should be terminated. Herr Ruhnau had already been summoned by Germanys transportation minister
to explain his supposed speculative management of Lufthansas exposure in the purchase of Boeing
aircraft.
In January 1985 Lufthansa, under the chairmanship of Herr Heinz Ruhnau, purchased twenty
737 jets from Boeing (U.S.). The agreed upon price was $500,000,000, payable in U.S. dollars on
delivery of the aircraft in one year, in January 1986. The U.S. dollar had been rising steadily and rapidly
since 1980, and was approximately DM3.2/$ in January 1985. If the dollar were to continue to rise, the
cost of the jet aircraft to Lufthansa would rise substantially by the time payment was due.
Herr Ruhnau had his own view or expectations regarding the direction of the exchange rate. Like
many others at the time, he believed the dollar had risen about as far as it was going to go, and would
probably fall by the time January 1986 rolled around. But then again, it really wasnt his money to
gamble with. He compromised. He sold half the exposure ($250,000,000) at a rate of DM3.2/$, and
left the remaining half ($250,000,000) uncovered.